75% of Parents Said They Were Doing Well Financially in 2021. Here's Why That May Not Last
- Stimulus funds and a boosted Child Tax Credit helped many parents shore up their finances in 2021.
- With stimulus aid off the table, things may be looking different this year.
Sometimes, good things are short-lived.
Raising children has never been an inexpensive prospect. But as living costs rise and childcare costs climb, many parents find themselves increasingly burdened.
Now the good news is that 75% of parents said they were doing well financially as of late 2021, according to new Federal Reserve data. But that may no longer be the case.
Did parents' finances take a turn for the worse?
Last year, parents enjoyed a number of windfalls that may have helped their financial situations improve. For one thing, Americans across the board saw $1,400 stimulus checks hit their bank accounts. Plus, parents were privy to a boosted Child Tax Credit in 2021 that put a lot more money in their pockets.
Prior to 2021, the Child Tax Credit had a maximum value of $2,000 per child. Last year's boosted Child Tax Credit increased that value to $3,600 for children under the age of 6, and $3,000 for those aged 6 to 17.
The boosted Child Tax Credit also became fully refundable, so families with no tax liability could still claim their money in full. Plus, half of the credit was paid in the form of monthly installments that went out during the second half of the year. That meant parents saw payments steadily arrive, as opposed to having to wait for their money as a lump sum tax refund.
But this year, no federal stimulus aid has gone out. Not only has there not been a broad round of stimulus checks, but the boosted Child Tax Credit went away in 2022.
At the same time, inflation has been soaring this year, driving the cost of everyday essentials like food and apparel up. As such, it's fair to assume that while 75% of parents may have been doing well financially as of late last year, that may no longer hold true today.
Today's parents might feel stuck
Parents are often stuck with unavoidable expenses, from school supplies to clothing they need to replace when their kids outgrow their old stuff. As such, telling parents to simply cut back on spending to improve their finances may not be helpful advice -- at all.
Compounding the issue is that affordable childcare has been even harder to come by since the start of the pandemic. And so now, it may be the case that some parents aren't working not because they don't want to, but because they won't actually come out ahead financially holding down a job once they account for the cost of childcare.
On a positive note, some lawmakers are continuing to fight for the boosted Child Tax Credit to return -- either in 2022 or in the future. If that were to happen, it could make a huge difference for a lot of families, especially in light of soaring living costs.
Unfortunately, a fourth round of stimulus checks is unlikely to happen anytime soon due to the state of the labor market. But parents should take some comfort in the fact that lawmakers haven't given up on the boosted Child Tax Credit despite it currently being off the table.
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